(Reuters) -A federal judge on Monday temporarily stopped bankrupt Voyager Digital from completing a proposed $1.3 billion sale to crypto exchange Binance.US, allowing the U.S. government more time to pursue appeals that challenge the legality of the deal.
The U.S. Attorney's Office for the Southern District of New York and the Office of the U.S. Trustee, the Department of Justice's (DOJ) bankruptcy watchdog, filed appeals in early March over a bankruptcy court's approval of the sale.
They argued that the protections could rubber stamp crypto tokens that might be unregistered securities, as well as transactions that could be illegal under U.S. securities laws.
U.S. District Judge Jennifer Rearden in Manhattan ruled Monday that the sale should be put on hold, overruling Voyager's argument that a delay could cause Binance.US to back out of the deal entirely.
Binance.US and Voyager did not immediately respond to requests for comment late on Monday.
Voyager, which filed for bankruptcy in July, said in court filings last week that the DOJ appeals should not be allowed to keep the company and its customers "in limbo" during a legal process of uncertain duration.
Binance.US has agreed to pay $20 million in cash to Voyager, and take on crypto assets deposited by Voyager customers. Those assets, valued at $1.3 billion in February, account for the bulk of the deal's valuation, according to Voyager.
The international Binance crypto exchange was sued on Monday in a separate legal action by the U.S. Commodity Futures Trading Commission (CFTC), which filed a lawsuit alleging that Binance.com operated an "illegal" exchange and a "sham" compliance program.
Binance.US maintains publicly that it is entirely independent of Binance.com, operating as the "U.S. partner" to the world's biggest crypto exchange.
The CFTC disputed that in its lawsuit, alleging that Binance personnel "dictated Binance.US's corporate strategy, launch and early operations" and that it has an ongoing relationship with BAM Trading, a company controlled by Binance CEO and founder Changpeng Zhao.
(Reporting by Jaiveer Singh Shekhawat in Bengaluru and Dietrich Knauth in New York; Editing by Devika Syamnath and Jamie Freed)